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    21Jan, 2022
    “Clarity” Regarding SANAS Letter
    Any verification undertaken from the 15th of August 2020, should be done so in such a manner that it does not exceed a period of 12 months from the most recent Financial Year – End. This was the subject of the SANAS clarification letter dated the 6th of April 2021 (which referenced a supporting SANAS email clarification dated the 14th of August 2020 and attempted to “clarify” said email). Unfortunately, this letter did not shed light on how companies should address the following real issue that several companies have and may still face: what happens if a company is in the middle of a verification and their current financial year, ends? Does the measured entity continue to finalize their verification or must the entity stop the verification immediately? You may say, that company should have planned the verification to start (and end) sooner! However, as consultants, we know that in certain instances, getting a company verified (and completing the verification quickly) is not always as easy as that, for instance:
    • In this “new normal” we find ourselves in, companies may have employees working from home and not always easily accessible.
    • Integral people to the verification may get sick and therefore be unable to provide information.
    • Loadshedding, internet connectivity and other factors also contribute to delays.
    It is therefore necessary for SANAS to provide a comprehensive statement so that there is no uncertainty for measured entities, verification agencies or consultants. Failing that, consultants should also be given access to ask SANAS questions or perhaps there should be one body that regulates all consulting firms and who can then provide more guidance in terms of the clarification(s)? When it comes to understanding the B-BBEE legislation and implementing the interpretation thereof, EconoBEE is dedicated to coming up with innovative transformation strategies for our clients that make business sense. Please feel free to reach out to us on 011 483 1190 or info@econobee.co.za if you would like to hear more.
    23Apr, 2021
    SANAS Clarity on measured period
    The governing body of verification agencies, the South African National Accreditation System (SANAS),  have sent a letter of clarification to all verification agencies in relation to the issue of the measured period. The letter is as follows: “I refer to the correspondence issued by Mr Yuneal Padayachy on 14 August 2020 in respect of the above-mentioned matter.(clarity on measured period)  We reiterate that the latest financial year end records must be verified for B-BBEE Verification purposes. The Verification Manual makes provision for the use of financial statements which are not audited and details the additional testing or requirements to be taken into consideration in reducing the risk to an acceptable level. These processes had been agreed to with the dtic and are not new requirements. If the intention of the legislature had been to allow for audited financial statements only, then it would not have allowed for the alternative testing or requirements on unaudited Financial Statements.  As a consequence of that communication, all verifications not done in line with that guidance, effective 15 August 2020, should be corrected. SANAS assessors will sample to determine if the guidelines had been followed by all Rating Agencies” The impact of this communication is as follows:
    1. Measured entities will not be allowed to use a measured period different to their financial period.
    2. Management accounts need to be aligned to the financial period, therefore an unaligned rating period will not be used.
    3. A measured entity is now required to use its most current financial information for a BBBEE audit. For example in 2021, a measured entity with a year end of February will need to use the financial information from March 2020 to February 2021. The measured entity being audited in 2021 will not be allowed to use the financial information of March 2019 to February 2020.

    Talk to us about how this communication may impact you going forward.

     
    18Jan, 2021
    Are you being sold a dubious B-BBEE share option scheme? Hear what the B-BBEE Commission has to say……..
    Firstly, compliments of the season to you all and here’s to wishing everyone a good 2021! I hope you have all managed to remain safe and hopefully had a decent break! Onto interesting business matters now……. Towards the latter part of 2020 we had a non-compliant QSE client come to EconoBEE and explain that they had a consultancy offer them an ownership option, which would make them an automatic B-BBEE level 2 (via the 51% affidavit route), and they wanted our view on it. We vehemently disagreed with the structure that was being “sold” to this client, and explained why, but we committed to get clarification from the B-BBEE Commission. Background:
    • The client is a QSE company (under R50m t/o) and they are non-compliant.
    • They were advised to set up a separate company that would have 100% black shareholders (either black employees or an NGO) and this company would have a 51% share option in the main company, which would mean that they receive an automatic B-BBEE level 2 (via the affidavit route) and would therefore also not be audited by a verification firm!
    • The devil’s in the detail and the detail here is the clarification of the “share option”!
    • The 51% share option showed a lack of real ownership and control, a lack of economic interest and lacked the authority to appoint the majority of the Directors in the main company.
    • At the end of the 5 year share option period, the owner would still be able to retain control of the company and the share option would fall away.
    • The B-BBEE Commission advised that where a “measured entity in an effort to comply with the B-BBEE ownership requirements, will establish share option structure not aligned to the requirements of the B-BBEE Act, such must be reported to the B-BBEE Commission” and this could lead to a serious fronting fine and/or criminal charges.
    To read the full view of the B-BBEE Commission, please click here To listen to one of our Legal Directors discussing B-BBEE fronting issues on eNCA tv, please click here To peruse our 2021 Online Workshop List, please click here EconoBEE has been at the forefront of guiding some of South Africa’s largest generic firms to obtain their B-BBEE goals, and we are extremely adept at putting together the best, most cost-effective, B-BBEE solutions for your business. Why not give us, at EconoBEE, a call on 011 483 1190 or email us and let us help simplify and expedite your transformation journey!